Southwest Florida executives praised Gov. Rick Scott on Wednesday for announcing he wants to eliminate the sales tax manufacturers pay on new production equipment.
A sales tax exemption for new equipment exists, but to qualify, companies must prove they’ve increased “productive output” by 5 percent after buying the equipment. Before Jan. 1, companies had to show they’d increased output by 10 percent.
Legislators cut the requirement during last year’s session and Scott wants it abolished entirely.
“Those machines come in here and they make you more efficient and allow you to hire more people, but you’re penalized for it,” said Kevin Hawkesworth, president and CEO of Shaw Development LLC.
The company — headquartered on Bernwood Drive in Bonita Springs — develops and manufactures components and fluid management systems for heavy-duty vehicles for Caterpillar, John Deere, Peterbilt, Lockheed Martin and others. It employs about 150 workers in several offices.
“We see this as a strategic move to assist businesses that operate here, allow them to grow, and for the state and local governments to encourage more businesses to relocate here,” Hawkesworth said.
The Republican governor made his anti-tax pitch Wednesday in Jacksonville. Scott will continue to seek tax breaks in the upcoming legislative session.
“Manufacturing accounts for almost 90 percent of Florida exports that depend on our ports,” Scott said in a statement. “Small businesses make up nearly 96 percent of the state’s exporting firms and produce 67 percent of the state’s total exports. Building up Florida manufacturing is about building up Florida jobs all across our state.”
While it’s encouraging news for local businesses, some Southwest Florida manufacturers might not see much of a savings.
“If that is what he’s proposed, then it probably doesn’t make much difference to me,” Bill Banfield, president of Mermaid Manufacturing in Fort Myers, said about Scott’s announcement.
In the past, when he’s invested in new equipment, Banfield said, his production has increased by far more than 5 percent.
Banfield’s company manufactures several products, including air conditioners for boats. He’s currently evaluating whether to add equipment for a new product line, but that determination will heavily depend on how he feels about where the economy is headed when he finally decides whether to expand.
The requirement for the exemption was cut to 5 percent this year after the reduction was approved during the 2012 legislative session and championed by Scott.
Florida TaxWatch, a nonprofit, nonpartisan public policy research institute, commended Scott for his efforts to do away with the tax.
“This tax has clearly been and remains an impediment to capital investment and the related job creation in Florida,” said Dominic M. Calabro, Florida TaxWatch president and CEO.
Betsy Allen, executive director of the Southwest Regional Manufacturing Association and a business coach, said more tax cuts could benefit many manufacturers in the area, helping them expand more quickly. At a workshop she held for local executives Wednesday, one manufacturer told her so, she said.
There are more than 17,000 manufacturing companies in Florida, employing more than 300,000, according to Scott. He said the current tax policy puts Florida at a disadvantage because most other states don’t force manufacturers to pay taxes on their equipment purchases.
“We know that when manufacturers purchase equipment in our state, they are investing in Florida workers for years to come,” Scott said. “We want more manufacturers to move to Florida, and our existing manufacturing companies to buy the equipment they need to grow and create more jobs to support Florida families.”
Bill Herrle, Florida state director for the National Federation of Independent Business, said Scott’s proposal represents both his commitment to freeing up capital investment and reducing government regulations.
With the existing regulations, he said, there are small businesses that probably qualify for the exemption, but haven’t taken advantage of it because the requirements to get it are too daunting.
“Our working presumption is that if you get that productivity requirement down to zero,” Herrle said. “Obviously, there is nothing to prove to the Department of Revenue and — boom — gone is the bureaucracy and the paperwork and the requirements in order to benefit from that arrangement.”
Scott has also proposed spending more money to transition workers from other sectors into manufacturing. To help with that effort, he announced in November that he’d work with the Legislature to double Quick Response Training funding to $12 million. The program provides funding for customized training to new or expanding businesses.